Since when does getting at truth wear's a watch?
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The president radical Democrats want to impeach, because he endangers our nation with his corrupt, self-serving foreign policy and who goes to sleep at night cuddling next to Putin in Putin's bed seems to be making progress on the foreign policy front. (See 1 below.)
When and if Trump wins a second term, as I believe he will, the mass media will have egg on their face a second time so their attitude and behaviour towards Trump should intensify and be nastier than ever. Also, since their credibility is around their ankles, I suspect those who hate Trump in the mass media will have even less influence as has been the case.
One day they might learn to simply report factually but that is probably a suggestion beyond their pay grade and mental capability. They have become entertainers first and have little room for playing it straight because they have lost all integrity.
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Ross Rants again. (See 2 below.)
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The more things are believed to change the more they, in most cases, are the same. Thus, begins Shlaes' second section as she walks us through the early Nixon years. The economic parallels with Trump involving domestic and political issues, save for the difference between inflation, is striking .
Nixon was constantly leaning Fed Chair, Arthur Burns, to lower rates even shaming him in public then later apologizing. Burns was not as strong willed as he should have been he sought time with Nixon who constantly avoided scheduling him.
Inflation was rising and gold, still pegged at $35/oz, was rising in price in the free secondary market. Allies, particularly Germany, France and Japan were killing us in trade because of tariffs they imposed when we did not. Nixon was always eyeing the upcoming election and needed union support. Inflation was eating away at union worker incomes and increased modest wage gain wins. The stock market seemed stuck and could not break 1000.
Moynihan's previous flirtation with a costly guaranteed income bill had died it's own death and he had returned to Harvard.
Nixon's impeachment had not surfaced and he was flirting with replacing Agnew with Connally, his then Democrat Sec. of The Treasury.
To resolve his plaguing economic issues Nixon called for a Camp David Retreat with his top advisors. They hatched out a program that called for the following: a temporary wage and price freeze, a cut in government spending and employment, closing the gold window temporarily, a reduction in foreign aid and a broad 10% tax on imports. There were questions as to whether Nixon even had the legal authority, The WSJ claimed he was acting monarchial and even many of the pro-capitalism economists present, who acquiesced, were uncertain as Volcker reminded them along with Hayek (who was not an attendee) they lacked knowledge and figures on which to base the reaction.
Shlaes ends writing about the partial planned destruction of President Johnson's/Moynihan, Pruitt-Igoe. A St Louis high-rise government housing monstrosity which failed for a variety of reasons: St Louis had not grown as expected, ,interventions by various public authorities, arrogance on the part of government authorities, hypocrisy in the treatment of middle class tenants and poor ones. The most significant reason this project failed is the occupants had no skin in the game and destruction of the property escalated, it became crime ridden and the cost of maintenance and repairs ballooned.
What government build man destroys. In the end Pruitt-Igoe was totally evacuated and destroyed.
Shlaes concludes with a variety of charts that reveal stagflation, poverty and other trends.
I fervently believe, though we have little inflation at present, it will rear it's head because there will come a time when interest rates will rise and the economy will get out of whack. Until that time, if Democrats allow votes on various trade deals to come to a vote and the shift of manufacturing out of China continues, the current economic recovery can be sustained for a lengthy period and the stock market can rise moderately as long as corporate earnings rise at a decent rate, ie. 5 or so % not including any benefit from buy backs.
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DORIS
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1)
Trump’s Foreign Policy: The Popping Point of Maximum Pressure
The U.S. is gaining momentum in our standoffs with China, Iran, and North Korea. So expect dangerous provocations.
Donald Trump promised to shake up U.S. foreign policy. He has certainly done that from the Middle East to Asia. The U.S. is currently engaged in a three-front, maximum-pressure standoff with China, Iran, and North Korea — involving everything from tariffs to possible military action and the strictest sanctions in memory.
At first, Trump critics saw these policy recalibrations as either impotent or counterproductive. Pessimists asserted that China, with a population four times the size of the United States’, was fated for world hegemony. Why antagonize those who might soon control our political and economic future?
Bipartisan experts talked not of the heresy of “stopping” China’s ascendance, but of “managing” America’s relative decline. Translated, the implicit policy conceded that the U.S., in its trade concessions, should overlook systematic Chinese trade surpluses, flagrant violations of world commercial norms, neocolonial provocations throughout Asia, stealing U.S. patents and copyrights, product dumping, currency manipulation, and technological appropriation. Supposedly, the more we appeased China through acts of magnanimity, the more they would reciprocate by becoming like us.
Our classic model for China’s supplanting the U.S. was the prior gradual hand-off of world hegemony from the British Empire to the Americans, as the United Kingdom in the 1940s tutored us on our global responsibilities and tried to play Athenian philosophers to our Roman legions.
The canard was that there was no alternative to appeasement, given China’s more dynamic economy and cold-hearted efficiency — so beloved by progressives when it came to Beijing’s construction by fiat of high-speed rail, shiny airports, and solar and wind farms. Trump, we were told, was a ridiculous Quixote tilting at Chinese windmills, with his 19th-century talk of counterproductive “tariffs” and ossified “trade wars.”
Not now. The U.S. economy is still humming. The stock market is at record highs. Unemployment stays at near-record peacetime lows. Oil and gas production is beyond anyone’s wildest imagination just a few years ago. The Chinese economy, from what we can tell from its state-controlled media and censored state agencies, is slowing down. Human-rights activists are coming out of the shadows to damn China’s reeducation camps. Riots continue in Hong Kong, along with Orwellian surveillance of China’s own citizens at home.
Beijing’s only hesitation in seeking an armistice seems to come from an expectation that Trump will not be reelected and that a Democratic administration will return to the status quo — even as China claims that it sees Trump as an easily manipulated patsy. The bottom line is that China views the present recalibration as intolerable and is desperately seeking some way to nullify it.
So we are entering dangerous territory not because we are losing our trade war with China, but because we are beginning to win it. Xi Jinping not Trump has overplayed his hand. The Chinese know that they cannot end the standoff by returning to the former asymmetrical status quo. Nor can they embrace a new fair relationship — it would be antithetical to the very means by which China obtained its enormous wealth in the first place. Something then has to give.
The Iran deal in 2015 was all that Iran could dream for. Tehran got a blank check to continue its nuclear research under the guise of “peaceful” nuclear development. Sanctions were dropped, sending billions of dollars into the Iranian economy that dampened popular unrest, fueled Iranian terrorist appendages in Syria and Iran, and fed its missile and drone force aimed at Israel and the Arab Gulf states.
Nocturnal cash was sent to free U.S. hostages. Inspection protocols were leaky. The subtext understanding for both sides in the agreement was that Iran would hoard its cash, keep up its nuclear research, stop transparent enrichment, and eventually announce to the world it had the bomb — but only in ten or 15 years, well after the Obama administration had left after enshrining the Deal as “monumental.”
Trump scrapped all that. He not only ramped up the sanctions but also pressured allies to join in on them. The result is that once-oil-exporting Iran now has riots over gasoline prices. Tens of thousands of protestors have hit the streets. Iran is waging a costly proxy war with Israel in Syria, is bogged down in protecting the Assad regime, and keeps seeking ways to send missiles and drones into the Gulf without its overt hand prints on them.
Iran wants to goad the U.S. into a confrontation, but it’s also unsure of Trump. For all his tough talk, Trump seems to set a high bar of provocation — perhaps a direct attack on an American vessel or a NATO partner’s warship. So far, Trump has more or less ignored Iran’s bombing of Saudi Arabia, the shooting down of an American drone, and the hijacking of allied commercial ships. Some Iranians believe that Trump is merely a “twitter tiger,” so they want to push him further; others fear that if they do, Trump will retaliate against the entire Iranian military with the full support of the American people.
Still, Iran’s strategy is not complicated. It seeks to stage an “incident” that will embarrass Trump before the 2020 election, demand a response, and thus offend his non-interventionist base. In Iran’s view, shooting in the Gulf would supposedly usher in a compliant Democratic administration analogous to the Obama team that was so eager to grant concessions.
But Iran also wants to limit its aggression and avoid entering into a missile free-for-all with the U.S. that would result in the loss of most of its military bases and nuclear resources.
At first glance, Iran’s brinkmanship seems suicidal, given the overwhelming military strength of the United States. But Iran also is slowly being strangled by sanctions and popular unrest. If things do not change, it will be broke and in total chaos within a year. Of course, the logical solution would be for Tehran to renounce all proliferation agendas, recalibrate the Iran deal with absolute transparency, and seek détente with the West. And yet such a loss-of-face move is apparently about the worst conceivable scenario for the revolutionary Shiite theocracy.
North Korea is relatively quiet but likewise is reaching a point of decision. Its impoverished population is reduced to a pre-civilizational existence as the Trump administration insidiously ratchets up sanctions on both North Korea exports and imports, and wages a trade war with its patron China. Food is scarce, and fuel rarer.
In 1999 the Clinton administration has almost achieved the same level of pressure — before relenting in the face of humanitarian pleas that the North Koreans were starving and eager to denuclearize. So it wrongheadedly lifted sanctions and pronounced the “Agreed Framework” a success leading to the denuclearization of North Korea.
Trump probably will not back off like that. We are therefore headed to an impasse in which North Korea feels that it cannot live with the current sanctions and cannot live without nuclear weapons. Something will have to give.
Yet the solution to that dilemma — North Korea gives up its nukes and receives a guarantee that neither South Korea nor the U.S. will remove the Kim dynasty — is nearly as unlikely as our standoff with Iran. Without nuclear weapons, Pyongyang’s dictatorship would get about as much attention on the world stage as Gabon or Paraguay. And with nuclear weapons, North Korea may drive its people to the point of starvation.
As pressure mounts, and the bursting point nears, we should expect North Korea to launch some missile or provoke Japan, South Korea, or U.S. forces in the area. With this, North Korea would hope to negotiate away sanctions while making its usual accompanying promises that it would finally, at last, absolutely and completely become almost — not fully, but nearly — denuclearized.
The most dangerous moments of a trade war, a political impasse, or an escalating military confrontation are predictable. They follow when one side, arrogant from previously being exempt from any consequences for its aggression, believes it’s starting to lose a conflict that it prompted and cannot afford to lose. At this critical point, it either lashes out to avoid defeat or accepts inevitable loss — but at least hopes to take its victorious adversary down with it.
Think of Japan running wild in China and Asia during the late 1930s, scorning milquetoast criticism from a disarmed Europe and the U.S., and then growing hysterical when Britain and the U.S. finally began rearming and sanctioning Japanese exports and imports — all leading to the cataclysm at Pearl Harbor and Singapore. Or remember Saddam Hussein’s financially exhausted Iraq in 1990, worn out from the disastrous Iran–Iraq war, and its growing indebtedness to the West and Arab world — and then in lunatic and disastrous fashion invading Kuwait.
The lessons are not that wounded animals defeat their stronger adversaries. Rather, when trapped and slowly bleeding to death in their caves, in extremis they sometimes prefer to leap out in a foolhardy and desperate effort to find some solution for their own self-created dilemmas.
In the next few months, we should expect a major provocation from either an increasingly beleaguered Iran or a flummoxed North Korea — and some sort of desperate quid pro quo from China presented as a last chance, a rare and magnanimous offer to stop the tariffs so “we can all just get along.”
Trump should stay the course and not let up until he achieves the original aim of his maximum pressure campaign. Nothing is more dangerous than to enter an existential standoff, feel momentum accruing, and then appease and grant concessions that destroy all prior sacrifice that heretofore had been finally paying off. Instead, he should expect our strapped adversaries at some point to do their worst, and then meet that challenge with our best — and ensure that our adversaries in their decline lack the power to take us down with them.
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2)The November jobs report and the upward revision of September and October are great news for the economy. It is also great for holiday sales. Workers will feel confident, they know they can get a new job in a day or two if laid off. U6 which is the real number is 6.9% which is near historic lows. Wages continue to rise, especially for lower income workers. Labor participation is near record highs. 350,000 people rejoined the labor force. Black unemployment is 5.5% a record low and that is what was once considered full employment for white workers. Factories, the area of problems, added 45,000-partially due to the end of the GM strike, but great news. Against this the Dems want to impeach Trump??? If this labor trend continues into 2020 Trump wins by a landslide.
I had the pleasure of being invited to a private dinner held by the Urban Institute and Moody's Analytics. The topic was housing. It was a gathering of 20 of the smartest people I have ever had the pleasure of discussing with. They included the former commissioner of the IRS, a senior exec of the NY Fed, the head of investment banking of a major bank, the head of Moodys Analytics, a former senior executive of Treasury, a current senior executive at Treasury, the head of affordable housing for NYC, the president of Urban Institute, plus others who were the top experts in the country on housing finance. It was a freewheeling discussion and exchange of ideas. Here are some of the take away. All of the people, other than me, were finance, or regulatory or research experts. None had real world development experience. I had a lot to say from a developer's standpoint. It is clear these experts know everything there is to know about housing finance and banking. The point being, they do not fully appreciate why developing affordable housing is so hard to make work, and while they have some creative ideas, in my view, some of these ideas are simply not realistic to execute politically nor economically for developers.
The group believes there will be no change to Fannie and Freddie. It is simply politically not feasible, and while Mnuchin is trying to change these GSE's administratively instead of trying to get Congress to do something, the group does not believe it will happen. Fannie and Freddie work very well now that the crisis is over, it is just that the taxpayer still bears some risk, although most of the credit risk is now laid off into the private market which is called CRT- Credit Risk Transfer. That removes the major risk from taxpayers. The real risk is in Ginnie with constitutes FHA and VA loans which only have a 3% down and usually low credit borrowers. The default rate is quite high. Ginnie is not able to do CRT deals where the FHA and VA risks lie. Taxpayers continue to eat the losses.
There was considerable discussion as to the private market mortgage servicers, and what will happen in a recession. It is believed that the servicers, who were once part of banks and were spun off, will again be acquired by the banks to be able to maintain smooth servicing in a recession situation when the servicer credit lines are shut off. Some believe that because the credit facilities will be shut off to these firms, there might be some disruption in the mortgage market in a recession. Nothing like in 2008-9, but disruption. Others think the big banks will simply step in and take over these operations. Some believed the servicer issues on a recession will exacerbate the downturn. I believe the banks will not let that happen and because rates are already ultra-low, and most mortgages required a 20% down, the default rate will be far lower than last time, and may not be a big issue, or modifications can be made to interest only at say 1.5% for two years to get thru any downturn.
They acknowledge that getting work force housing built is extremely hard due to how hard it is to make the costs make sense, and because there is so much resistance by voters to not in my neighborhood. They were concerned that if the affordable housing is built in outlying areas where land is cheaper, then we are just concentrating the poor in isolated areas, and so the schools will not be integrated or quality, and we are just perpetuating the poor life for them. I made the point that the issues with affordable workforce housing development is a combination of: excessive regulation which creates delays and a lot of unnecessary cost, high priced land, less attractive economics than a market rate project, less available capital for these projects, and voters who do not want these projects in their neighborhood. The head of NYC housing said opportunity zones have not worked because there is a three year limit on getting the projects under development. I suggested they need to get Congress to amend whatever is wrong because opportunity zones will work to get the low income housing. In fact, I think that is key to getting much more built. I also believe that government should institute some type of tax break programs in outlying areas to attract light industry and other business so the low income workers do not have to travel far to get jobs. A local opportunity zone program at the state level might be one way.
There was considerable very technical discussion about how the banking and mortgage markets work, and the history of how we got where we are. I had trouble following some of the esoteric details that only nerds know. In summary, there was disagreement on a number of issues, but it was a very high level and robust discussion, and it was so good that we agreed to do it again. The nice thing was that while there was some fundamental strong disagreement on some things, it was all a very adult and intelligent fact based discussion, and not at all political. I don't think Trump was ever mentioned, and I know several people are ardent liberals. Everyone got to make their case with no interruption, and disagreements were presented through facts, not rhetoric. A delightful return to civility and free speech.
Mark Zandi still predicts a recession to begin in mid-June based on a forecast of a weakening job market, and that it will be getting worse, and then feeding on itself until unemployment rates increase, and then that feeds more labor cutbacks. I disagree, because I think the holiday retail sales will be great, and I think there still will be China and USMCA deals. The November jobs report seems to suggest the recession prediction next year is not going to happen. There will be some sort of tariff reduction or delay, and that will mitigate some of the slowdown. Zandi thinks USMCA will not get to a vote purely because the Dems do not want Trump to have a win. If that happens the Dems will pay a big price in November on top of impeachment as it will just prove they were so into impeachment that they cannot get even accomplish strongly supported good things. In addition, the EU is stabilizing, and China may be as well. If the world economy does stabilize, and retail is as good as I expect, then we have a slow growth year in 2020, but it will not be a recession. Zandi is a lot smarter than me, and has a whole organization of really smart people who study the economy every day, so he might be correct. Just keep your attention on data the next few months, and if unemployment does increase to near 4%, it may be time to consider getting out of stocks. Keep in mind that the ADP labor report is purely larger company private employment, and does not include many smaller companies.
Trump is going according to classic negotiating script. Acting like "I don't need to do a deal", "I can wait until next year", etc. It is all posturing and games. The Chinese are doing their own version of the same games. The Chinese never stop negotiating and playing games, and then they cheat anyway, as they have done with WTO. I still expect a deal to get signed fairly soon. USMCA will also happen soon as the Dems need to finally look like they accomplished something, and there is enormous pressure now to pass it. All the talk by Nancy that there are enforcement issues etc is just delay excuses.
Look around the world and you note that it is in one of the periodic upheavals that has happened throughout history. Iran is experiencing the worst upheaval in its 40 years. The more they kill, the more the anger will increase. It is now at a boiling point, and we have to assume Israel, the Saudis, and the US are aggressively stirring the pot in a variety of ways we will never know. Iran is getting pushed out of Iraq, Lebanon is in continuing turmoil, and Yemen is now headed to a possible cease fire as the Houghties can no longer stand the humanitarian crisis brought about by Iran. Iran is almost out of currency reserves. The sanctions are crushing them. I expect a military attack of some sort any day now by Iran which will not get ignored this time. When Iran collapses, the world changes.
The far left ideology so prevalent on campus is now infiltrating high schools, especially elite private schools. The graduates of the universities who were imbued with the radical campus ideology are now the teachers and administrators in high schools. Alo0ng with the far left politics has come anti-Semitism to a degree we have not seen in decades. It starts with the Palestinian mantra about Israel being a terrible oppressor, and morphs into anti-Semitism. This whole ideology of the left is getting to a point that it is becoming as dangerous as the far right.
I recently was having dinner at a local restaurant here on the upper west side of Manhattan. Next to me were two women who appeared to be in their late sixties. They seemed to have been educated based on the early part of their conversation. Then one starting going on about how inspiring Schiff was, and how the biggest problem in America today is the law that allows big corporations to make political contributions and employ lobbyists. She then went on to talk about how big companies are all monopolies, and they are crushing the middle class, and they needed to be stopped. Welcome to the upper west side of Manhattan. I wished I had a MAGA hat so I could have worn it while eating. It would have made them go nuts. I nearly said to her that she would really enjoy life in Russia, but I decided to just eat and leave. This is typical of the far left uninformed ideologues. They may be educated, but they have no clue about the real world.
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